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 The charge into stocks pushed yields on low-risk government bonds
higher, though a sale of German 10-year debt attracted bids worth
less than the amount on offer. The U.S. Treasury is scheduled to
auction $21 billion of 10-year paper later.
Oil prices stabilized but concerns about oversupply remained.
European shares followed Asia higher, with the pan-European
FTSEurofirst 300 index <.FTEU3> up more than 2 percent. U.S. index
futures <ESc1> <SPc1> suggested Wall Street would open up about 1
percent.
The stock market gains were sparked by a rally in Chinese shares on
Tuesday, when weaker-than-expected August trade reinforced
investors' expectations that Beijing would act to bolster slowing
growth in the world's second-largest economy.
China's Finance Ministry said on Wednesday it would strengthen
fiscal policy, boost infrastructure spending and speed up tax
reform, helping lift Chinese shares for a second day. The Shanghai
Composite closed 2.3 percent higher and the CSI 300 index rose 1.96
percent while Hong Kong's Hang Seng was up 4.5 percent.
Angus Gluskie, managing director of White Funds Management in
Sydney, described Wednesday's stock rally as a "speculative bounce".
"The market will remain susceptible to a return of negativity until
we see signs of some improvement in the original causes of weakness,
which were predominantly Chinese growth concerns," he said.
Signals from Prime Minister Shinzo Abe that Japan will cut corporate
taxes pushed the Nikkei 225 <.N225> stock index up 7.7 percent, the
most it has risen in a day since the depths of the global financial
crisis in October 2008.
MSCI's broadest index of Asia-Pacific shares outside Japan also
rallied hard, rising 3.2 percent, with gains across all the major
indices.
Investors' increased appetite for risk saw the dollar firm against
the safe-haven yen and the euro. The single European currency was
down 0.2 percent at $1.1182 while the yen was 0.6 percent weaker at
120.53 per dollar.
Notable gainers in the currency markets were the Australian and New
Zealand dollars. Both countries are exposed to Chinese growth.
RISK SENTIMENT
"I don't see an end to risk sentiment driving currencies any time
soon," said Shusuke Yamada, chief Japan FX strategist at Bank of
America Merrill Lynch in Tokyo.
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"It all goes back to China, where opaqueness remains over its
currency market, monetary policy and capital controls. The forex
market is most on edge about a further possible devaluation of the
yuan."
China devalued the yuan by 1.9 percent on Aug. 11.
Crude oil prices edged higher. Brent, the global benchmark , was
trading all but flat at $49.50 a barrel.
"Fundamentally, the market is following the stock market," said
Tamas Varga of PVM, adding the market remained oversupplied. "The
strength is going to be temporary."
German 10-year bond yields rose 1.8 basis points to 0.70 percent.
Germany sold 3.2 billion euros of the paper at an average yield of
0.69 percent, attracting bids worth less than the 4 billion on
offer.
U.S. 10-year Treasury yields, which rose in New York on Tuesday with
shares, headed higher still and were last up 3.6 bps at 2.23
percent.
"The environment for the auctions seems tricky amid the ongoing
concerns about Chinese selling (of Treasuries). No one really knows
how Chinese demand is going to behave and that's creating
uncertainty here," said Commerzbank strategist Michael Leister.
Gold held above a three-week low, last trading at $1,120.60 an
ounce, having fallen as low at $1,116.20 earlier this week.
(Additional reporting by Nichola Saminather in Singapore, Lisa
Twaronite in Tokyo, Emelia Sithole-Matarise and Libby George in
London; Editing by Catherine Evans)
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